Transcripts For BLOOMBERG The Pulse 20141218

Im francine lacqua. We are getting breaking news from germany. That december number bank in line with expectations. That is also what we were expecting. The Current Conditions number is well in line with expectations. Economists got it right. There you go. Breaking news. Lets check on the euro if we have that in terms of current assessment. That is one of the strongest figures at 110. Lets begin with our other top story. Vladimir putin taking to the podium. The spotlight on the russian president today. Markets and investors around the world are all ears to hear what the russian president will say at his annual press conference. It goes on for a while. We will be in and out of this for the next few hours. Four or gifive hours. Journalists have been told not to bring in cuddly toys. There will be no cuddly toys of out within the auditorium. Lets get our Bloomberg View columnists take on this. Jim oneill is with us. Who was that daft person how muchay that the world has changed. That is so down on energy, so down on the oil price , and this country is so overly exposed to the commodities story, how do you navigate it . You tell me the answer. Who knows . Some part of me has thought for a while that it has almost been the reverse of how conventional wisdom discusses business. The economy and the low oil price prompted them to do these rather odd things the last couple years. The oil price was high. It has been coming down for three years. It has gone from the hundreds to the 60s. At 100, he could do pretty much whatever he wanted. The number of times ive had discussions with their key advisors, they always assumed oil prices would stay high. I think amongst all the Major Oil Producers that are vulnerable, they are probably the worst. Turned, it might have changed their minds about how they would play things. Oil prices at these levels may be here to stay. What happens to a russia under between 60 to 80 . Over three years of my life doing a phd about oil. The only thing i learned is, dont try to forecast oil prices. The only guarantee, they wont stay exactly where they are. What happens to putins russia . Ive never met him but ive met everybody else. , he all used to say to me is the smartest person in there. Doesnt look like that right now. Many people in the west say that about him as well. It doesnt seem like that right now. He has made quite a bad calculation. Where was the miscalculation . Going back to oil, he might hot have took it to is mind that oil could drop this much. That is what affects 140 million russian people, particularly with the collapse of the ruble. Theres two reasons why i think he has been so popular the past 15 years. One is because he is such a tough guy. The second thing is a lot of are seeing their wealth rise up considerably. They are the wealthiest of the bric countries, or they were. The past year is changing that. If it carries on like this, it is going to be difficult. We are expecting that News Conference to start any second. Im surprised you dont want to listen to every single word. If he is the smartest man, how does he play this . Does he apologize . If you were in charge i dont know. It is a really peculiar issue, especially the financial aspects. Normally, a country under this kind of pressure would look for outside help. Western countries are probably hoping it goes on. I find myself thinking, will he china to intervene and show support . China has said, your problem. It would be very difficult. The tone of what he has to say today will be interesting. If he is as smart as ive been led to believe, and this includes people that are very close to him, then he will change his mind. The smartest people ive ever met, one of the reasons they are so smart is they are not scared of changing their minds. Maybe he does that. Is the easier thing to change policy i think you cant control the oil price. Clearly not. He could easily change his mind significantly about eastern ukraine. Do you think he can control the oil price . One of the things that is coming out of opec is that there is a believe that if nonopec members decided to back a reduction in production, we would see opec doing the same thing. Indirectly, it could have an influence. One might say the whole reason the saudis are being so cavalier is because of their friends in washington encouraging them to do so. That wouldnt be the first time such ideas you could consider the possibility. I wouldnt dismiss it. The oil price is clearly very oversold. Even though i joked that it is impossible to forecast, actually , from my long, following this take yearsink it can to get the big picture. Me, threee obvious to years ago, oil was going to come down. It has done it. I dont think it would take that much to turn it around. A shift in the right russia is behaving could help. Conventional wisdom is that putin is on a mission and he has realized the west is weak. That doesnt strike me as that feasible. It would be virtually impossible for him given the fragile state of their economy. Will putin stay in power . I dont know. Maybe not. Policymakers get in their heads that they go on forever. Happens and it goes beyond their control. This could be the beginning of the end. Come up with ao different policy on ukraine, and of the sanctions that were put in place in july were lifted, how much of a rest bite would it be . Respite would it be . Would see a big move in Eastern European related assets. Part of the reason europe has the surprise of the german slowdown. Sentiment about germany would turn a lot. And after so exposed being slow at the start, chancellor merkel became at the forefront of being against russia. If you were to see a shift, i think you would see a lot of germanicrelated european assets. We had other news. Between the u. S. And cuba, the swiss franc, how are these events related to Vladimir Putin . I guess you could try and link them all. One would imagine the move that prompted the swiss could be evidence of extreme capital flows into zurich and elsewhere from russia. That has been building for a while. It is romantic to link the cuba thing with russia, but i doubt that. ,y own suspicion is that obama looking to make some Big Initiative that will give him some legacy, has been thinking about Something Like this for a while. I dont know ive been to havana. It is really exciting. Theyve been waiting for this for decades. We were chatting offline before, maybe it is more to do with perception about jeb bush and the republicans keeping florida. Going toks like we are see president putin walking on stage very shortly. I think it would be interesting to see how the swiss franc itself trades in response to this move. The timing of it is a bit of a surprise. If you see euroswiss start the bounce and it keeps up recovery through the weekend looking at it for the last half hour, not doing that. The rally is beginning to fade. There is pressure on the smb. And we have the allimportant Ecb Press Conference on january 22. The Swiss National bank will then have to deal with what the ecb does. They have decided they will publish accounts after the policy meeting. We will see the machinations. The ecb . They will publish regular accounts of policy discussions. You might as well i like your thinking. That would be fantastic. Would you welcome transparency . In a very political ecb, it becomes more difficult . Im a bit removed from the dealing room atmosphere. I can imagine some guys in my early days, part of your value was trying to be the guru. That business is becoming redundant. I think in terms of public welfare,on and social it can be the best way. Keep it right there. Vladimir putin has just started speaking. We have also celebrated manufacturing over january to october. It grew by 1. 7 . Unemploymentes is still low at the moment, dropped below 5 , now stands at about 5. 1 . The Industrial Complex continues to develop. Willesults of the year show that the growth has constituted 3. 3 . As you are aware, we have had record harvest this year. 104 million tons of grain. Despite all the turbulent events in the financial markets, our federal budget this year is going to be a profitable one, in the black. We are going to have greater about 1. 2 trillion rubles, about 9 of gdp. 1. 9 of gdp. Profit rather be than a deficit in the budget. The main result of the year in the social area is of course the positive demographic. The natural rate of growth has 37. 1 thousand people. The birth rate is increasing. We are going to do everything to preserve it. We are going to continue capital from 2014. 429,408. 5 rubles. We have achieved and exceeded the target indicators, the ratio of our earnings to inflation on 10 categories. Workers, social teachers of universities, doctors, nurses, and also workers in various cultural institutions. In 2014, we indexed the pensions twice. From the first of february by 6. 5 . From the first of april by 1. 7 . Weve paid attention to increasing our combat readiness and combat effectiveness of our troops and our army. Everything,numerate but social indicators have shown 11,700 soldiers and officers got accommodations. People were also provided flats and houses. This is 100 of the targets that we set ourselves. These are the figures. Now a few words about the Current Situation. All of us understand that the main question facing us today, the main question that is of is thet to our citizens, state of our economy, our National Currency, the development situation, what is going to happen in the social area, the changes in the economy. I will try to be very brief and paint a picture in a few broad , explain the situation enough to end the press conference. If you do have some questions, im going to try to answer them. Theres no doubt that the Current Situation has been provoked by external factors most of all. We havent done much from what we had planned, although he said that we should diversify our economy. We have been talking about it over the past 20 years. It has been very difficult to favorableven the external market situation, when the money and businesses invested into the areas, where they could get a very quick profit. To change the mechanism was very difficult. The situation has changed, however. The Current Situation has been impacted by the external economic factors, the oil price most of all, and also gas prices, which are linked to oil prices. I think that both the central bank and the government have. Een taking adequate measures of coarse, there are questions to be answered both by the central bank and the government about how timely those measures are. Generally speaking, they have been adequate. They have been proper and correct. The depreciation the increase of our national ruble, is welcome. Stable . It is possible to stabilize the ruble. What about oil prices . Will they go up or go down . What are we going to do if this happens . We are going to use the different measures that we have already used quite successfully in 2008. In such a case, we would concentrate, focus, on assisting those people who really need it. Also, i would like to emphasize this, to maintain all our target ,ndicators in the social area covering the broad range of social issues such as pensions, wages, etc. There is no doubt, if the situation goes on developing unfavorably, we would have to make some adjustments into our plans. We will have to review something, to curb something. There is also no doubt, as experts say, if you go into the , and thed the growth outcome, the bounceback is inevitable. Because the growth of Global Economy is going to maintain, the rate might be slower, but the economy will continue to grow. Our economy is also going to bounceback from the crisis. How long will it take . With the most unfavorable scenario, it would take two years. I would repeat, the growth is inevitable. The market situation is going to change. With the growth in the world newomy one would need energy resources. Over this period of time, we would actually achieve a lot from the point of view of diversifying our economy. Life would make us diverse of five. There is no other option. We could not function otherwise. I would repeat, there is no dischargere going to all our undertakings based on the reserves that we already have. We have grown those reserves. , 419ntral Bank Reserves billion, the central bank is not going to waste those reserves without thinking, and the reserves of the government, and the reserve fund has grown by 2. 5 trillion rubles. The entire volume of reserves is about 8. 4 trillion rubles, which means that we can meet all our social obligations, diversify the economy, and inevitably, the situation is going to normalize. Quite inevitably. This is really the end of my introductory remarks. We could in fact end the conference here. But if you have questions, im happy to answer them. I would like to begin with those who have been working together with Vladimir Putin, with the kremlin pool of journalists. To whove the floor has been working with Vladimir Putin for many years, traveling around the world, and our country. So i have an interesting job. The situation in the country, there is a deep currency crisis in our country. So deep that the central bank is saying they could never have envisaged in their Worst Nightmare such a crisis. You say it will take us to years. Will we actually surpass this situation . The black monday, the black tuesday. Have been a lot of criticisms against the central bank, against the government. Do you agree with those critics . This is just the beginning of the News Conference. We will come back to that News Conference shortly. You can continue to watch it on bloomberg. Com or streaming live. Vladimir putin talking about the economy, trying to focus on the achievements he has done instead of all the mayhem in the ruble. Conference hass been taking place, weve seen another one in switzerland. The head of the snb making questions which draw a link between the action taken this morning to take a negative deposit rate and the fact that russian money has been flooding into that country. Jim oneill is still with us. Snb tosage from the moscow, we dont want your money. Looks like it. Going back to what we touched on earlier, that is part of his problem. We got a lot of allies to get out of this situation. An absolute complexity of how this get solved. My thought for the swiss is that while there was obviously the if iactor this morning, put my old market hat on, that is like telling the market, swiss franc is now in a ruble situation. Im not sure how the swiss franc will keep. Probably not a great thing to have said in the short term. It puts more pressure on the Swiss National bank. In terms of tools, this is already quite a bold move. Hasnt really had the effect they wanted. What do they do next . Im not sure that resorting to japanesestyle intervention or some of their own version of importantthink it is for them given they have this for what is it 18 months . They cancel around. Around. Cant fool i imagine there is a lot of derivative contracts sitting just below 120. Jordan isne quite a sharp guy. I would imagine they are doing a few things. Put that in the context of the wider world for us. We approach the end of the year with this big focus on em problems. Maybe i need to get less distant. If i look at your bloomberg infosystems, most em markets are the strongest performers in the world this year, china in particular. Fairly recently. India, indonesia. Angle, ike the em think the message is, if you undertake reform, markets wont pick on you as much as they will in the event of tightening. My read on the fed, i think yellen is saying, we are ignoring the oil price decline. I thought that was a bit on the hawkish side. Thank you so much, jim oneill. We are back in a couple of minutes. Welcome back to the pulse. Im francine lacqua. Im guy johnson. A couple interesting lines coming out of the press conference. The russian president saying the central bank shouldnt waste reserves on the market. Good to hear about intervention independent central banking. Dont you think . Hes also saying, the central bank is acting properly. He was responding to criticism of his central bank governor. Mustalso saying that work be done daily to control prices. After he was talking about the economy in general, now addressing the markets following incredible moves on the ruble. Listen in . Lets do that. You know that these measures you understand very well red tape is the worst danger in russia. Decisionshe important are drowning in red tape, including the president ial decisions, how confident are you that what you are stating here, your decisions, your ideas, are going to be implemented and fulfilled and that your optimism is going to be confirmed by real steps, real actions . As you know, insurance is the only thing that can make you optimistic. Is the macroeconomic policy and reserve fund for meeting our social obligations . Very dependable insurance which gives that optimism. Fighting red tape, i can tell you this our colleagues from the european union, ask them about brussels. They will tell you about real bureaucracy. That beats our bureaucrats hands down. , red tape is not the only thing. When i started my intervention, is could be the end of the press conference. It is not just bureaucracy of decisions. When you have the external market situation forcing people operating in the country, invest in the energy business, in the chemical industry, in metal manufacturing, however much of a government tries to coordinate their resources, it is not really possible because we dont have the budgetary resources to use as tools. We have used them over the few years. To create more conducive environment for real manufacturing. But it is moving very slowly. Particularly when you can make greater profits by investing in the energy sector. 80 of applications to the government are linked not to investment in high tech, but in obtaining permission to develop a field. Why . Because this brings you a quick buck, and a large box too. Why . If the market situation is different, that would force us to invest in other areas. This gives me optimism, however strange it might seem. Going to be hard. Yes, we would have to try to resolve social issues, meet our in the degreeions of 2012. Can we do this . Yes we can. We can use the existing situation to create additional diversify the economy and improve our businesses and heavy manufacturing. The situation today is going to assist us in doing that. Colleagues, less continue please. I ask you to be very brief. Cant go on without you. Thank you very much. At the start of 2012, in one election articles, which later turned out to be a decree, akov,ited alexander golch quoted him as saying russia is focusing. Can you tell us, what is happening with the country now . Is russia still concentrating, focusing, or is it may be time to focus on getting relaxed now . Thank you. One needs to work. Not a lot has changed in this regard. Vladimir putin theyre talking about some of the moves we have seen on ruble. He talked about the central bank , really defending all the criticism. We will continue to monitor. We will continue to listen to what the russian president has to say. This press conference will be ongoing for most of the morning. Plenty more headlines still to come. In the meantime, i want to take you to what is happening in greece. Greek parliament held the first round of voting to choose a new president overnight. Lets cross to athens. Elliott kotkin can be found there. Candidate falling short in the first round which doesnt bode well for the next two. It doesnt. No one expected him to win last night. No one expected him to get the 200 votes needed. Votes they needed, 200, was simply too big a gap to bridge. The government may be to get a little more support. All it managed to do was get five lawmakers to support it. Now, samaras has the next 11 days in which to persuade additional lawmakers to come over to his side. He may use carrots on sticks. To be say, you dont want responsible for greece being embroiled in more turmoil. Or he might simply appeal to their desire for selfpreservation. You might not get reelected. Vote with the government. Meantime, it is going to be a nervous 11 days for the Prime Minister. He will have plenty to talk about when he hangs out with other leaders in brussels today. To be too dont seem unnerved by last nights vote. Quite the contrary. Greek borrowing costs were down a little bit. The market opened a little higher this morning. Go figure on that front. Most people, if they took a decision, they were surprised last week at the announcement that president ial elections were being brought forward. They worked through the possibility that the antiausterity syriza party might win general elections. I think a lot of people will be waiting to see what happens. Makess to see if samaras up more ground. December 29, the third and final round to see whether the president gets the vote or whether new elections have to because called. Elliott kotkin in athens. Lets talk about the hack attack on sony. The decembernceled 25 release of the interview amid threats of violence. Caroline hyde has the story. A fairly dramatic turn of events here. They decided they cant take the risk and they are doing what some would say is the right thing and pulling it. Unprecedented. They are going to be losing millions of dollars by doing this. Not only were they attacked in terms of their computer systems, but the attacks took on another level. I think you could call them cyber terrorists now. They started harkening back to september 11, putting out statements that the world will recommendingar and people distance themselves from where these films are being showed. Saying, do were want to be showing this film . It is a comedy, which is based on a plot to assassinate kim jongun of north korea. Amc putting out a statement saying, we are not going to show it. Sony itself saying, we have decided not to move forward with a plan to release on december 25. All of this had had to come to a standstill. Some say they should release it on a web. Free and that for they might be concerned with retaliation. I think the retaliation has already been gotten first. This has been unfolding for sony. In late november, they were crippled. Horrendous email chains getting shown across the web, leaked salaries showing distortion in pay for female versus male. We even had Angelina Jolie being called spoiled. You had snapchat getting in on it, having to the embroiled in releases of what they have been buying up. What is fascinating is, a, the fact that we are learning the United States might say that it is indeed north korea that is behind the attacks they havent actually revealed that. We dont know formally. Even more fascinating is if you look at some of the blogs. They are saying, it is probably not north korea at all. What a nationstate be this vocal . Put outardians of peace pictures of blazing skeletons across sony . Would they be this noisy . They are saying, it is probably other cyber hackers. It is useful to be able to blame north korea. Whatever will happen, i think a film will be made about this. Thats the great story. This is a film in the making. Thank you so much, caroline hyde. Coming up, more on russias financial crisis. President putin continues his News Conference. We will speak to the moscow stock exchanges cfo. Welcome back to the pulse president putins News Conference is continuing in moscow. We just had a fairly forthright question directed toward the president. What else have we learned over the last 40 minutes . Ryan chilcote has been monitoring. He seems to be finding his stride. He has taken a provocative question from a ukrainian journalist who started by asking, how many troops can you send into our country . Ng the russianri president talk about russias policy in ukraine, the most provocative part of the discussion thus far. He seemed to be a little bit not himself. He did get into the ruble when asked. He reiterated a couple things youve heard before. The central bank shouldnt waste its reserves. This is mostly an external problem. He did have some bite criticism for the government and the Central Banks response. Not anything severe enough that would suggest to me that he is prepared to sacrifice. He is a very loyal guy and i think he is going to remain that way. Finally, he also said that nato was to blame for the situation in ukraine. Something weve heard before. Russia feels isolated and betrayed by nato, which wasnt supposed to expand to the east. I guess the markets were expecting something on capital controls. Would this be a great opportunity for him . Weve got another three hours and 15 minutes to go. I think he is prepared to talk about that. Capitalthe concern of controls and the short term is subsiding. You can see that if you look at the shares in sberbank. People have been paying a premium to buy the london paper. The premium they are prepared to pay to get that security is actually subsiding. Ryan, stay with us. We are now joined by evgeny fetisov, the chief Financial Officer of the Moscow Exchange. Give us a sense of how much you are worried about the situation at this moment in terms of the message to International Investors. The worst possible outcome would be to talk about capital controls. Are you sure this conversation is not happening in the kremlin . That is not something i can be sure of. I think we are not worried. We take care of the risks and we focusing on the risks in infrastructure and the exchange side. We monitor what is happening with volatility. We manage the margin requirement. This is what we do. In terms of the capital controls, i think the issue is overblown. Global,ple think about they are looking at the local share, which has the same rights. Is, we have seen flows coming into the local market. This is what weve seen. I think this is the result of the upgrades to the infrastructure. We have a Central Security deposit rate. We have equities and fixed income. This is for the International Investors to be trading. How big an impact do you think the volatility will have on foreigners desire to own russian assets . Andruble has crumbled stocks have been bouncing around all over the place. In that environment, it is very difficult to make a trade. And have any confidence in the direction in which assets are going to move. How big a problem is the volatility . It is a problem. It is a problem for regular investors. Weve seen investors in the u. S. And u. K. Who are willing to buy russian companies. There are a number of companies which are very attractive. Everybody is waiting for the situation to be more stable. People are willing to take the risk. Moves, it is more difficult. We are there to help people trade under any circumstances, to be open and reliable as we want to be. Ryan here. Can you give us a sense of how investors reacted on tuesday to the 23 plunge in the ruble . Has there been panic . Is there a rush to the door to exit . How concerned are you about these Interest Rates we have now, 17 , that has really pushed up bond yields. Youve probably seen the same picture. The investors didnt react well. It is a difficult situation. It is very volatile. I wouldnt say weve seen a rush to the door. I think they left the market sometime ago. Specialists still looking at the market and trading it. Rate, it isnterest high, but this is what central bank had to do. Analysts expected it sometime earlier. It is easy to say this now, when things have happened, but i think this is the right path they are taking. The rebound weve seen in the ruble, do you think the ruble is now somewhat stabilized . I wish i knew. I wish i had a crystal ball. It is something i hope for. Internally, i believe it is undervalued right now. It is the currency to buy. How big a problem are sanctions . How big a problem is the noose around russias from sanctions . Were thethetically, sanctions to be lifted, what impact would it have on your market . It is difficult to judge the impact in numbers. Investors speak about the sanctions even if they dont believe in them. They are concerned. As i think they should be. Lifted, ictions were think that would definitely have a positive impact on the market overall. Much. Right, thank you so very interesting view from the Moscow Exchange chief Financial Officer. Thank you for joining us. Yeah. Quite interesting there at the end. Evgeny fetisov joining us from the Moscow Exchange. Right, we are going to take a break. Coming up, going all out on clean energy. That in todays new energy. Welcome back. You are watching the pulse live on bloomberg tv. Cracks in todays new energy, bowling plans to switch to all Renewable Energy at its 737 Assembly Factory in washington state. The Aerospace Company plans to eliminate energy generated from coal and other fossil fuels by buying more Renewable Energy credits and investing in wind power. Assembles 42 planes per month at the plant. The philippines in digital Indigenous Community has agreed to a renewable project on its land. The chief signed a memorandum of agreements with the authority on that project. It is combined solar and wind power. For those listening on bloomberg radio, the first word is up next. For our viewers, a second hour of the pulse. We will be speaking to jon moulton. We will get his take on russia, emerging markets, and on the u. K. We will be talking about the royal mail. We are also hoping to speak to lord midas. We will get his take on that as well. Aus, we will be spending great deal of time talking about Vladimir Putin. The press conference on going. Many more hours still to go. A few more hours to go. Just a reminder, you can follow us on twitter. We will also head over to athens. Putin at the podium. The russian president says the central bank is acting properly. Negative territory. Cuts ass National Bank the euro becomes more expensive. Sunny pulls the release of the controversial film inte rview over. Pulls at the release of the controversial film after threats by hackers. Good morning to our viewers in europe, good evening those in asia, and a very warm welcome to those just waking up in the u. S. Im guy johnson. Im francine lacqua. This is the pulse. Live from bloombergs European Headquarters in london. Lets talk about Vladimir Putin. Speaking at his News Conference. Going on for about an hour and we are expecting it to last around three hours. Ryan chilcote has been listening in. The important thing is, this is basically the russian president s first time weighing in on russias National Currency since the currency went into hyperdrive. Anything he says about the ruble is important. He says the central bank and government made some mistakes. You get the sense that they still have his backing. You do not get the sense that prepared to sacrifice the Prime Minister or the governor of the central bank. Saying it is right for the central bank not to sacrifice its reserves. Ruble is weakening. Not saying anything that would strengthen its position. Thank you very much indeed. We will continue to monitor what the russian president as saying. A press conference that develops over time. A considerable amount of time. Weve had an hour and possibly three or four to go. Newspportunity for more is there. He has to live up to the trailer which we showed yesterday. Out of a hollywood movie. Investors perspective, jon moulton. What are you most concerned about for next year . Russia literally melting down. It is not a high probability but it is there. The markets are going to be very unstable until this resolves. It affects confidence. Is that the biggest impact . A big impact. It is having impacts all of the place. Oil also asked oil service companies, austrian banks with exposure and russia, italian banks. You dont know how its going to work out. You can say russia is not that big an economy but it has tentacles everywhere. Theres a lot of debt that could go very badly wrong. Did sayhe things putin earlier was that they increased their military strength in the last year. Not a reassuring message. How do you see this resolving . Does Vladimir Putin have to back away . Is he the only one with the key to resolving this . Despite a crushing ruble, he is still fighting the fight. Whether you like or agree with him, he does not lack courage. Leaders inseen our the u. K. Putting themselves up for a four Hour Press Conference with no script. He was defending himself against the ukrainian not so long ago. The man has got immense power, immense positivity, courage. He is incredibly popular. He has popularity ratings twice that of most of western europes leaders. He is still very popular. It remains to be seen how long his popularity will last as people get poorer quickly in russia. One of the things hes having to deal with that is out of his control is the drop of the oil price. You see the oil price go from 60. To the drop has been fairly i watering. Eyewatering. Anything that is Energy Intensive becomes more exciting to be in. Is goingn airline, it to make a big difference next year. On the other hand, somebody in the oil services industry, is a catastrophe. People are not going to be drilling new holes are setting up new plants or keeping old expensive fields going. You think that growth around the world will surprise us to the upside . On total, lower energy will give growth upside and not downside. It is very dependent on where you are sitting. If you are in and goal at, this is bad news. If if you are an angolan, this is very bad news. An american, this is positive. In the u. K. , this is very positive. Talking about the right amount. Talking about the royal mail and caused for help talking about the royal mail and calls f or how ipos are handled. Is this an acceptance of the fact that in a difficult environment the british authorities did a good job . Good morning. View of the expert panels that i chair it is that this issue was priced pretty close to the maximum level that it would have cleared at. A prospect ofably a little more money if they had. Ore time they were operating within a tight timescale and they were highly nervous. This was a well executed, complex transaction which put the royal mail back in the private sector. It took the taxpayer off the hook for future funding. Raised a couple billion pounds and led to the share price 12 months later trading where one would have thought it would have done a year into life as a private company. What we go on to say is the process of building is opaque. It lacks transparency. Being gamed by participants. It needs to be revisited and replaced by a more formal digital auction to price new issues. At the same time, you are basically saying there is no evidence to challenge the general assertion that an ipo price could have been greater. The government could have gotten more. Isi think where it could only halfway. You go on to say but, in pursuit of the final few pence, not an insignificant amount of money, the whole transaction could have been placed at risk. The world was in a fragile mood. The american debt ceiling was about to be reached. Employeesoyal mail were having a strike vote. There was considerable uncertainty. In the immediate aftermarket, there was some quite extraordinary dealing by one or two hedge funds, including one who we name. Who bought any available stock and drove the price up to levels which were not sustainable. The idea that you could have ipoed the stock at 4 or 5 pounds, which is where the shares traded for a period of time is not based on a solid analysis of the facts. What are the takeaways from this . Aboutlked in the report the need to change the process. At how i couldg take advantage of the report to improve the story, what are my takeaways . What can i do in the future to make the process better . There are a number of things. Suggest splitting the perspectives and having a prospectus which has the data on the company. Then a later document issued with an indication of pricing range. That would mean the u. K. Would have a more flexible approach to pricing than it previously has had. Very few ipo price ranges are changed in the u. K. Compared with 40 in america. The move from book building, which is based on expressions but nonbinding expressions of interest to a more digital auction. I would love to feel that jon veryon, who is a experienced venture capitalist and private equity man would say ive never been happy about the building. Book building and i think myners has a point. Why dont we auction this . You have a point there. Paul, this pricing was set in an odd way. Before an advisor was appointed for the government, ubs and goldman had institutions waving a price at them. The price was set before the government took any involvement at all. It really did not fail in book building. It failed because the advisors were not acting for the government, they were acting for the company and its management. The were let loose before government appointed an advisor to a point in advisor. That is not the way we saw it. There was a long period of talking to investors through education. Appointeds lazard relative to the ipo . Before the ipo. They evaluated a number of , including selling to private equity. They began to build up an investment they did not do most of the institutional tour. The tour was done mostly by goldman and ubs. That was before it lazard was involved. That is not correct but i understand what you are saying. In the report, you do not criticize the advisors. Jon is taking issue with that. One other thing, the government did not seem to take into account, in the 18 months prior to the ipo, the two advisors they appointed to run the ipo had been fined about 15 times between them. Yet nobody seems to have considered whether that is a factor which the government should have taken note of. Is this something you looked at . It did not fall within my terms of reference. Pretty hard to find any Financial Institution providing structuring,l etc. , who has not had some regulatory infraction. I assumed that Better Capital would never use a firm that has been subject to regulatory fines . Virtually impossible. But it should have been considered. Was it should have done have a presumption that the advisors would work for themselves rather than the client. There was abundant evidence of that. I agree with your point about book building. I dont think it was the heart of the problem in this ipo. How do you conduct sorry, carry on. An auction, which is the way tedged gil securities, a digital auction would be transparent, open, it would not be subject i agree. What would be really good wellrespected a figure like jon moulton say this is how we are going to press our next ipo. I chair a stockbroker so im heavily involved. For the large ones i think you are right,a digital auction is feasible nowadays. Youve gotten crowdfunding at the bottom and digital auctions at the middle. Book building is getting smaller. Investors are threatened by this and resistant to change. Well it has been a very profitable business. You can understand why they would be opposed. Do you think that is the message . The banks that are so invested in this process need to be their roles need to be reconsidered . Do you feel you are starting a process . Pushing an opening door when it comes to reviewing the way we conduct this . I would hope there would be a debate. Im not sure it is an open door. I think there will be a lot of institutional and are set. Inertia. Building is something which are merged with the americanization of the European Capital markets in the 1990s. There are plenty of peoples which will be threatened by a digital auction. It will leave vendors and investors to say were not entirely happy with book building. We think it can be improved. We really want this to be seriously considered. One analyst issued a positive, about it. Apart from that, do you see appetite for making the changes you talked about . Especially the idea of using digital auctions to improve ipos. I think it will take somebody to grasp the initiative. It may take somebody to come up with a digital model. They are already used for ipos in australia. Will take somebody to say you know we can do this and it is going to be a lot cheaper. Also a lot more transparent. And much less prone to gaming and the sort of arguments thatjon put forward about where do peoples priorities lie, etc. Thank you for taking your time to join us, paul myners. Former Labour Party Treasury minister. As well. Goodbye im sure you will be swapping ideas shortly. There was a certain amount of agreement. Teasing this is the start of a positive process . It might be. Thank you so much. We also have some breaking news from putins News Conference. We are back with that in a couple minutes. Welcome back to the pulse. We continue to monitor what is happening in moscow. Vladimir putin delivering his annual press conference. The press asking questions. One of the lines within the last couple minutes, an answer to one of those. Flat amir putin making it clear that the kremlin will Vladimir Putin making it clear that the kremlin will not be forcing exporters to sell revenues to generate a positive story for the ruble. Hes been fairly positive about the way the central bank has been handling the story. The relationship between the kremlin and the central bank is being a tight one. A quick check on the ruble after we heard Vladimir Putin make those comments. Isterms of where the ruble right now. It has been quite volatile. At 62. 01. We are going to change directions. We are going to be talking about one Israeli Company creating innovative products. A range of phones designed to deal with a number of skin ailments. They debuted on the nasdaq in september. The stock has been extremely volatile. Weve then bouncing around. Stock hit we saw the a record high. It is an interesting company. It ties into the wider conversation about bioTech Companies, how you value them and their place in this ipo world. Weve seen Tech Companies being overvalued. A lot of analysts saying biotech has not gone the love they deserve. We have great stories. We have russia, the Swiss National bank. One that took the markets by surprise. Yet it has not had a big impact on the Currency Exchange market. We did see a fairly big move in swiss francs. It has come down a little bit. Plus, what has been happening with castro and the story surrounding cuba. Some interesting lines mixed up. We have fixed our technical issues that i am sure you have seen we are having judging by that slightly rambling interview. Join go to tel aviv and. Oamixs ceo the ipo has generated volatility for you. Of what yourse experience has been as a fully fledged listed company. Pleased that we completed a successful ipo. We now have about 45 million at to move our product into advanced Clinical Trials and to market. Beentock has done, has stable for the last couple months. Over theed to see it initial ipo price today. Theres been so much volatility on the markets. What youalking about worry about the most now that you are a listed company. Leave aside your core business, dealing with shareholders and volatility. What pushed you to go onto the nasdaq . Have products, topical minocycline to treat acne. Skin products to treat infections like rosacea. To move them forward into a trialnced clinical and finally into market, there is a need for large amount of cash. Cashatural way to raise is to go public. We did successfully on nasdaq last september. We are satisfied with the results. A question from jon moulton, a private equity guy in the u. K. How do you think investors value your company . What cap chelation they used to come up with your price what calculation do they use to come up with your price . They see the potential of our company, which addresses unmet needs in dermatology. To million americans with acne. Moderate to severe acne today is treated by oral antibiotics, which are associated with very common side effects. Our success in developing a topical antibiotic which addresses moderate to severe High Expectations to us and to our investors. Alltotal market for antibiotics in the u. S. Just for acne is in excess of 1 billion. Oncepect to see our drug, approved, capturing a large portion of that market. You arelly was selling expectation and hope, it seems. People do not have a numerical cognition. Now . Are your revenues excuse me, i did not hear the question. What are your revenues now . Again . The revenues. Some technical problems. Lets leave it there and we will get you back. Dov tamarkin, the ceo of foamix. More from president putins News Conference. Speaking on a number of topics including ukraine. Follow us on twitter. I am guyjohnsontv. flacqua. S we will be back with jon moulton and president Vladimir Putin when we come back. Lets listen in to the press conference as we leave you into the break. Instability to implement a project like that. Dont you think that russia on theto capitalize results of the Olympic Games because of the tragedy that occurred in the ukraine . An additional question, we are he worldning to host t cup in 2018. Its a very expensive event requiring lots of investment. In the conditions of the sanctions and the oil prices and the ruble rate, do you think russia will be equal to the task . Welcome back to the pulse. Live from bloombergs European Headquarters in london. I am francine lacqua. Im guy johnson. A strong session to finish u. S. Trading yesterday. Ibex up, ftse made gains, dax up. Ftse in london up. Punchy retail sales. Expecting a pop, comes in higher. Equities and commodities higher. Oil price moving higher, brent above 60. As i look at the euroswiss move at the back of the rate cut, going negative. Is it enough . Up. 2 , trying to protect the swiss franc. The smb trying to weaken it. It is the story with russia. The acceleration of safe haven flows. The governor of the swiss citedal bank has it. Benoit coeure was talking yesterday. Thank you very much. Vladimir putin has been talking about a range of subjects. He has addressed the issue of ukraine. He spent the first part of the press conference talking about the economy. Lets listen to one of the highlights. This situation has been provoked by a external factors. Haswe believe that a lot not been done by us of which we planned in diversifying our economy. Vladimir putin speaking earlier in the News Conference about the russian situation. Watch the ongoing conference on bloomberg. Com. Were an hour and a half into the conference and expecting another 2. 5 hours at least. With jon still moulton. Also joining us, philip. What should we make of what weve heard . Where is putin politically at the moment and what are we learning . Putin is in a dangerous place. Hes just an centralBank Reserves will not be used to defend the ruble. Hes made the assumption that the Oil Price Fall will only be two years. Theres no evidence that it is going to be temporary. If you go back to 1986, the oil price to 10 a barrel and isolated between 10 and 30 a barrel. That is half the current price. We might be in a situation where oil is longterm heading further. The russian economy is predicated upon oil. Every 10 fall in the price of of its gdp. Ssia 2 oil is between 70 to 85 of the russian economy, depending how you calculated. Russia cannot survive sustained low oil prices. Politically putin is in a dangerous situation. The defense that he has a large amount of foreign reserves is a mirage. Nearly half of it is committed to the National Sovereignty fund to protect pensions. He has already thrown in the towel. He cannot defend the ruble. If we look at the wider situation, two things make this a dangerous longterm game. If you look at the oil wars, saudi arabia has decided it is a swing producer. It is not turning off the taps because it is involved in the conflict and it wants to undermine the shia states for shortterm political necessity. If it harms other people that support its enemies like russia so be it. Assad, the killer is the feds decision to call time on the dollar. Trillion in debt that emerging markets have. Russias collapse will play into the emerging market crisis. If we have an emerging market crisis, that is the danger for the world economy. These things are almost selfperpetuating. The crisis of confidence can hurt the ruble. Putin cannot defend the ruble. You also say the oil price will go down. What happens to russia . Will he have to step down . If he cannot defend the ruble, are we heading to capital controls . We are deftly heading for capital controls. The ruble is not subject to his control. Theyve been defending the ruble to know good and. He is at the mercy of forces he cannot control. What does putin do . The classical move for a russian leader, if you are in trouble, stuck nationalism. It gives you personal and political security. Putin has pulled russia out of the disaster of boris yeltsin. An increase in russian Living Standards and the russian people want to think of themselves as a brave and noble power. He has an arm to construct loyalty. What the west feels is he will do something stupid. Theresa plane to go a plan to go from the east of totransnistria, cut off odessa and make ukraine and learned a lot make ukraine a landlocked country. If something strange happens in baltics, there have been several near misses. If putin is under a threat, essentially he has created a eace between local oligarchy. If he goes for nationalism, what you and i think is in russias advantage is not in his. This is your fear, that we end up with an unstable situation. This is a guy that puts out pictures of himself holding a hunting rifle, he runs russia. He is potentially very dangerous. The risks of military action are very real. Once those get going, anybody can guess what the outcome is. We should not underestimate putin. In many ways hes a deeply gifted political leader. He saved russia from social and economic collapse. Is he as smart as people say he is . Is he getting a false sense of security of his ability to get a grip on the situation . Wars happen when different sides had different redlines. And people across them and they do not know why. We are in a very dangerous situation with russia. We do not want conflict with russia for any number of regions. The west was astute, it has to create a facesaving way out for putin. What that is is not clear. The russian economy is a basket case. It is smaller than most people recognize. On purchasing power parity, 15 to the u. S. Economy and 30 of the three largest western europe economies. Its uniquely vulnerable. But it is important for wider social economic stability. N dont know what a russia safety net looks like. They cannot control the ruble. There economy is dependent on one commodity. Wider forces are in play in terms of the glut of shale oil, the saudishia war. Total external russian debt is 800 billion u. S. Dollars. Doubled. Cing has i was putting it into real money, sterling. Thats an amount of money the west could find easily. That would help the ruble a lot. Their reserves are 100 or something when you strip out cant sorthat you out is a feeble economy for the future. Inrosneft has 50 billion debt. It has gone to the states and asked for 49 billion. West could say we will restructure your debt provided you give us peace in ukraine, that is a prize putin will go far. How vulnerable does that . Eave putin hes blaming everybody else. If the west were to say we are going to help you, doesnt that make him vulnerable . Hes already extremely popular. If he merely drops to being moderately popular that would be a fine outcome. Do you believe hes as popular as the numbers suggest . An educated russian and the phd and an mba, they support putin. He saved the nation, undeniably. Bwest no longer has a strategic brain. Europe is selfinvolved. Obama is the most incompetent president in terms of foreign policy. They used to have an organizing mind in the west. Who would go . Ingo to putin and say exchange for peace in ukraine we will remove sanctions. Currently they cannot roll over their debt. And we will finance your economy. You do not need to go public. A dealbillion in cash, on ukraine. The person to do this is angela merkel. She speaks russian. Shes respected. In felt betrayed by putin ukraine. Germany is not a good diplomatic double player. Can you see this happen . Yes. The alternatives are horrible. Strike a pessimistic note, the west does not have a strategic mind. I think the most likely outcome is actually more instability for russia. I think that is the percentage call at the moment. If we see longerterm the oil prices, russias in for a rough time. It that danger is spills over into the emerging markets crisis. Which is on already. Then were in for systemic issues. Jon moulton and phillip blond. The Swiss National bank has gone to a negative deposit rate. In some ways to stop russian money flooding its economy. Hans nichols is joining us from berlin. We have listened to what the snb has to say, what did we learn . Publicly all they are saying about this is defending the 1. 2 level. Theyve floorceiling what franc toee, the remain weak. If it gets too strong the swiss mittelstand is in a bond. Anc was on the 1. 20 line. The Swiss National Bank President did not enumerate a lot when he spoke a little bit ago. What he did say, the introduction of the negative Interest Rates makes it less attractive to hold swiss franc investments and thereby supports the minimum exchange rates. 0. 25. On the crucial question of whether or not they are directly intervening, purchasing swiss francs, they havent said what they want to do. Hans nichols with the latest on the Swiss National bank. Federal reserve chair janet in on ways and weighs oil prices and delays a rate hike. We talk about cuba. The take of our panel on what is next for that story. Welcome back. Patient is the new watchword. The new message from the federal reserve. Yesterday reiterated it is still on the path to raise u. S. Interest rates midway through next year. Not anytime soon. Mike ricci joins us from new york to explain mike mckee joins us from new york to explain. What did janet yellen deliver . A little more clarity than we got from the statement. N awkward effort a joke from alan greenspan, if you understood what i said, you must have failed. that was not Janet Yellens goal. All along theid early at the middle of next year. The problem is the u. S. Economy has been growing faster than forecast. They raised their growth forecasts yesterday 42015 and lowered their unemployment forecast. They did not want investors to read that as a signal that they are going to raise rates early in the year. So we get this awkward statement instead of eliminating their promise to leave rates low for a considerable time and replace it with the word patient, they left both in the statement. Janet yellen did say that met at meetings the first two in january and march. They could go in april but that is not a press conference meeting. It leaves us with june, which is where they were all along. If inflation is still forecast to fall, wire they are track for higher rates. They are looking at the core rate, 1. 6 . Is notstabilizes that going to go down and it might start to rise. They can use it as an excuse to overshoot a little bit on unemployment. Let it go lower than you otherwise would be for you start raising rates because they do not have an inflation problem. Thank you very much indeed, mike mckee. A busy day. Everybody looking for answers on the fed. One of the big pieces of news out of the u. S. Yesterday. The other big piece was the attempt by the president to start the process of normalizing relations with cuba. Lets get a take on what this does to us and where it leads us in that process. We are back with jon moulton. Also joining us, phillip blond. What was the Political Capital nation population . What was the political alculation . Hes thinking about his legacy. He wants to create a legacy. This is a clear win. Obama has always been deeply icantrated as certain amer attitudes that have no reasonable ground. If he can break one and pass and pass it without his opponents, he will. To give some credit to him, i think it is the right move. Cuba,can create a benign this is the way to go about it. The history of regimes when they emerge from authoritarianism is not good. They either collapsed into criminalized sections of the country and result in a new dictator, you could think of russia once more. Across central america, it is a disaster zone violence and social problems on in unprecedented scale. Theres a sense in which obama is trying to do the right thing. He is to be congratulated for it. Is this a legacy or is this a obama telling Vladimir Putin you lose this one, i win . Theres a bit of that. It is rather nice to knock off one of the remaining soviet allies. Got them back in the friendship routine. I think it is mostly he needs to be doing something. U. S. ,her bit, within the amongst the hispanic community, one has to think this will be popular. Interesting to look ahead to the next election. You know jeb bush. Do you think this is a political calculation taste on the fact that he runs and hillary cannot win florida . At helping so. I dont think so. Inanything, the cubans florida will be opposed. Are hard right. I dont think any political population is involved. Hes conscious of how he will be seen. History is going to paint him as weak. It is not clear that this move in florida will shift the state decisively one way or the other. The real goal for a progressive American Foreign policy is can abroad . E a stable near the munro doctrine. In centralailed america, mexicos war on drugs. America has undermined its near abroad. It has created social and economic systems that have spawned people who hate america. As well as high levels of crime and goodness knows what. Theres a chance for positive american policy to grow and learn from the past. And grow a stable neighbor. But im not hopeful. On that note. Thank you so much for joining us. Jon moulton and phillip blond. Back in a couple minutes. We are bringing you snippets from leaders lunch. I gathered three ceos. They shared in predictions for next year and secrets to their success. Your success is based on the fact that you are selecting the area where you are operating. Absolutely. Becomes a situation highprofile case. Everything for everybody. Nobody is smart enough. We do not think we are smart enough catch the full conversation with the leaders. Leaders lunch airs tomorrow at 5 00 p. M. U. K. Time. We will be glued in front of the television. That is it for the pulse. Around is next with tom keene and the team. This is bloomberg surveillance. Putin tells his countrymen the ruble will recover. The price, canceling the release of the interview. The cost might be in the hundreds of millions of dollarss. Gourmet goodies for the holidays. Good morning, this is bloomberg surveillance. Live from new york this thursday, december 18. Scarlet fu with Brendan Greeley and leslie picker of bloomberg news. Tom keene is off. Ews, Vladimir Putin is trying to reassure the russian people about the economic crisis. Conference,l press the russian president predicted the situation will last at most two years. He said russia should not waste currency reserves to prop up the ruble. Putin blamed outside factors for the economic slump. This situation has been provoked by external factors. We believe that a lot has not been done by us of which we